Interpreting LESSO's ESG Report: Sustainable Development Boosts Stable Operations, Demonstrating Long-Term Value

Grand News Network | June 24, 2024

China, 24th Jun 2024 - In a complex and ever-changing global economy, with both opportunities and challenges in the domestic market, LESSO (2128.HK) remains steadfast, viewing sustainable development as the cornerstone of stable operations, as it strides into the future with a long-term perspective.

Through LESSO's recent release of the "2023 Sustainable Development Report," investors gain insight into the initiatives and achievements of this leading domestic large-scale building materials and home furnishings industry group in ESG and sustainable development. This marks the ninth consecutive year of releasing related thematic reports since the group's first "Corporate Social Responsibility Report" in 2015, highlighting the group's strong image of sustainable development and steadily solidifying its internal strength across cycles.

Practicing Green Economy, Leading Towards a Low-Carbon Future

With the official introduction of the "dual carbon" goals, the construction period of the clean energy system has commenced. Manufacturing is a key industry for energy conservation and emission reduction, and the green transformation of manufacturing is crucial for achieving the "dual carbon" goals and building a low-carbon society. As a leading in China enterprise in the plastic pipe industry, LESSO has been actively promoting low-carbon economy through its efforts in areas such as pipes, photovoltaics, and energy storage.

Products serve as the best response for a manufacturing enterprise to embrace transformation and the new economy. During the reporting period, LESSO adhered to environmental protection concepts in product research and development and production, and in line with development trends, it expanded the scope of environmentally friendly products from various perspectives such as technology, application, and category.

Taking the nuclear power field as an example, the carbon steel or stainless steel conveying pipes used in important water systems of nuclear power plants are prone to corrosion and scaling problems as the years of operation increase, affecting the reliability of cooling sources and the safe operation of units. The polyethylene (PE) pipes for nuclear power plants developed by LESSO have excellent seismic performance, strong resistance to seawater corrosion and sediment erosion, low flow resistance, high strength, good toughness, and long service life. They are particularly suitable for seawater cooling systems, such as industrial water systems in nuclear power plants. Compared with traditional pipes, they greatly improve the reliability and maintenance convenience of the system, promoting the continuous improvement of the technology and equipment capabilities of China's nuclear power industry.

During the reporting period, Guangdong Lesso accumulated 15 products certified as green building materials, and Guangdong Lesso Rili Doors Co., Ltd. had four products certified as China Environmental Labeling Products.

In the current context of accelerating the transformation of the energy structure towards clean energy, photovoltaics play a crucial role in China's clean energy system. Based on the national "dual carbon" strategy and relying on its own resource advantages and synergistic effects, LESSO has continuously deepened its layout in the environmental protection industry and entered the photovoltaic industry.

As of December 31, 2023, LESSO had participated in the construction of 98 photovoltaic power station projects, including 62 domestic projects and 18 overseas projects, and invested in 18 power stations with an installed capacity of 25.65 megawatts.

In scenarios such as home energy storage and industrial and commercial energy storage, the company has launched integrated solutions, including energy storage systems and charging piles, to collect, store, and charge light energy. These solutions meet users' photovoltaic power generation needs and facilitate new energy consumption, capacity expansion, and peak shaving and filling. Additionally, they help areas without power grids achieve electricity coverage, maximizing energy economic and social benefits.

Green factories are also an important part of the low-carbon economy. Since Guangdong Lesso obtained the National Ministry of Industry and Information Technology's green factory certification, various subsidiaries of LESSO have also continued to make efforts to implement green factory operation requirements. For example, Shaanxi Lesso Technology Industrial Co., Ltd. has continued to carry out multiple energy-saving and consumption-reducing measures such as comprehensive utilization of solid waste, recycling of water resources, and VOC reduction, promoting ecological environmental protection upgrades. In October 2023, Shaanxi Lesso successfully passed the provincial green factory certification through self-assessment, third-party evaluation, recommendation by local industrial and information departments, and expert argumentation.

In addition, LESSO integrates low-carbon concepts in waste management, climate change response, circular economy creation, and promotion of green offices.

From a key performance perspective, in 2023, the company's photovoltaic power generation reached 35.67 million kilowatt-hours; water resources were reused 5.7416 million tons; and 160,441 tons of plastic were recycled.

Actively Participate in the Modernization of Agricultural Industries and Rural Development

Giving back to society and reciprocating is an indispensable part of promoting one's own sustainable development. Adhering to the spirit of responsibility and dedication, LESSO advocates fulfilling social responsibilities in development and actively participates in rural revitalization, social welfare, charitable donations, and other activities, jointly creating happy lives through practical actions.

Promoting comprehensive rural revitalization and accelerating the modernization of agriculture is the focus of work during the "14th Five-Year Plan" period. Especially for farmland construction, building high-standard farmland cannot be separated from the support of agricultural technology.

As an important participant in the construction of agricultural modernization, LESSO, with the role of a corporate citizen, extends its main products and services to various fields of agriculture, leveraging its pipeline industry and technological advantages to help build high-standard farmland, empower freshwater aquaculture and marine fishery transformation and upgrading with technology, provide pipeline facilities and solutions for the agriculture and fishery industries, build a modern smart agriculture system, and contribute to realizing a safer, smarter, higher-quality, and more environmentally friendly modern agriculture.

Currently, in the northwest region where farmland facilities are relatively weak and the environment is dry and hot, the problem of land salinization caused by improper water use has become an important challenge for local construction of high-standard farmland. Against this backdrop, LESSO is committed to the research and development of water-saving agricultural facilities, developing a variety of high-quality agricultural pipe products such as PVC-U circular cultivation pipes, PVC-U square hydroponic pipes, and PVC-U substrate cultivation troughs, which are applied to important links such as cultivation, irrigation, spraying, and water supply. These pipes are made of high-quality lead-free PVC materials, meeting green environmental requirements and ensuring the hygiene of the cultivation system. At the same time, the pipes have properties of pressure resistance, tensile resistance, corrosion resistance, damage and aging resistance, extremely low friction coefficients, reduced resistance when irrigation water passes through the pipes, smoother water flow during irrigation, and significantly improved hydraulic conditions of the pipeline network. In addition, in conjunction with water-saving irrigation methods such as drip irrigation and sprinkler irrigation, these pipes can effectively improve irrigation efficiency, reduce water resource waste and soil salinity accumulation, maintain soil fertility, promote crop growth, and promote the green, high-quality, and efficient development of agriculture.

In recent years, China's fishery economy has grown rapidly and has become an important part of China's agriculture and a significant growth point in the rural economy. However, water pollution and overfishing have brought challenges to China's freshwater fishery aquaculture. Under the guidance of the national policy to vigorously develop agricultural power, relying on the technology and service advantages of pipeline products, LESSO has developed pond circulation water aquaculture and tailwater treatment systems, efficiently separating the residual bait and feces generated during the aquaculture process, solving the problem of water pollution in aquaculture waters from the source. The system can process more than 1,500 cubic meters of water per day, and the water circulation and reuse rate exceed 99%. In addition, LESSO has independently developed an integrated circulating water aquaculture system suitable for high-density green aquaculture, which can achieve functions such as ammonia nitrogen separation and removal, inhibition of pathogenic microorganism growth, heavy metal removal, and auxiliary oxygenation. Thus, it purifies and reuses aquaculture wastewater, enabling aquaculture subjects to maintain the best physiological state under high-density aquaculture conditions, thereby improving fish survival rate and growth speed and optimizing the quality of aquaculture products.

A high sense of social responsibility is also reflected in a series of public welfare activities and community charity practices. For example, LESSO has established the "Charity Social Welfare Project Management Measures" to standardize public welfare and donation activities and strengthen the management of charitable and public welfare activities. The company maintains close contact with local communities and regularly organizes various public welfare activities and volunteer services such as poverty alleviation and condolences, care for special groups, and support for education, among others, to create a mutually beneficial, co-governing, and inclusive community atmosphere. In 2023, the company donated a total of 3.8828 million yuan externally, and employees participated in volunteer activities 68 times.

Coordinating Multiple Stakeholders to Create a Good Ecology

Corporate governance is an important condition for determining the quality of enterprise operation and development. Good corporate governance can reduce agency costs, enhance core competitiveness, improve business performance, and ultimately achieve sustainable development for enterprises. With the rise of the ESG concept, the importance of corporate governance in contemporary business operations has become increasingly prominent.

Upholding the brand commitment of "Sustainable for a Healthy and Beautiful Space," LESSO injects sustainable development into its top-level design, improves corporate governance and sustainable development management systems, maintains communication and cooperation with shareholders, investors, employees, suppliers, and other stakeholders, and creates more value for all stakeholders.

Complete corporate governance is the basis for safeguarding the interests of shareholders, maintaining shareholders' trust sustainably, and increasing the value of shares held by shareholders. LESSO has continuously created value for shareholders through various measures, including improving corporate governance, formulating the "Anti-Fraud Management System and Reporting Policy," and establishing an ESG regulation structure.

For investors, LESSO reviews the Shareholder Communication Policy annually, establishes platforms for domestic and foreign investors for communication through multiple channels such as regular e-mail correspondences, results announcement conference, investor reception meetings, roadshow meetings, daily reception of calls, e-mail replies, reception of survey, etc., maintains exchanges and interactions with investors and promptly follows up on investor advice through an efficient and transparent communication mechanism, and constantly perfects and improves its governance to maintain positive investor relations.

For employees, the company has implemented various measures to support employee development, including establishing a comprehensive insurance system, launching activities to support workers facing challenges, building talent pipelines, opening up career advancement pathways, conducting diverse training programs, and offering competitive compensation and benefits. These efforts aim to create a fulfilling workplace environment and foster mutual growth with employees. Statistics indicate that the total training time for employees reached 374,631 hours, with 80 training courses developed during the reporting period. Additionally, the social insurance coverage rate reached 99.26%. LESSO received awards such as the 2023 Guangdong Outstanding Employer and the 2023 Foshan Harmonious Labor Relations Enterprise, recognized by Liepin.com, during the reporting period.

In terms of partners, LESSO has consistently maintained strong, stable, and close cooperative relationships with suppliers and industry partners. The company empowers suppliers through technical exchanges, on-site visits, and other forms of collaboration, managing suppliers' and distributors' business activities with high standards throughout the entire life cycle. In 2023, the company conducted a total of 2,311 supplier training sessions, with 2,770 suppliers participating in the training. Diversified support was provided, including training empowerment, sales channel expansion, store support, and business assistance.

The ESG concept has permeated all aspects of LESSO's daily operations. This annual sustainable development report serves as a significant window for observing the company's ESG practices. Through this report, we gain insights into LESSO's practices and achievements in pursuing high-quality development, improving the living environment, enhancing the value of the building materials and home furnishings industry, and aligning with national development trends. Strong ESG performance also enhances LESSO's investment value, expands its investment moat, and is expected to further increase the attention of this major brand in the capital market.